The Point: June 21, 2013

NCUA issues final loan participation rule

Yesterday, the NCUA board passed significant new regulations for loan participations. The regulations set new requirements for selling and buying participations, for participations to single originators and for single borrower concentrations.

Key provisions include:

  • NCUA is extending the rule to cover all state charters, as well as federal charters.
  • Originating lenders must retain at least 5 percent of the outstanding balance of a loan through the life of the loan. This requirement applies to all originating organizations, including federally insured credit unions and privately insured credit unions. The risk retention requirement will continue to be set at 10 percent if the originating lender is a federally chartered credit union.
  • A single originator cap has been set at the greater of $5 million or 100 percent of net worth. A cap of 15 percent of net worth has been set for a single borrower concentration.

Additionally, credit unions must:

  • have written policies regarding loan participations;
  • establish a borrower’s membership in the originating credit union or one of the participating credit unions; and
  • have evidence of a continuing participation interest by the originating lender for the loan’s duration.

Notably, NCUA did agree to allow a purchasing credit union to participate in types of loans it does not originate.

The rule will become effective 30 days after publication in the Federal Register. Detailed meeting results will be posted on NCUA’s website.

NYS Legislature passes prize-linked savings bill

A bill that will allow New York credit unions and other financial institutions to establish prize-linked savings accounts has been passed by both the Senate and Assembly. The legislation, introduced by Sen. Andrew Lanza (R-Metropolitan) and Assemblywoman Annette Robinson (D-Metropolitan), is now headed to Governor Andrew Cuomo’s desk.

Prize-linked accounts offer consumers an opportunity to win promotional prizes when they make deposits in share/savings accounts. Similar programs have proven to be successful in several other states and countries, resulting in a higher number of new savings accounts and larger amounts saved.

Older adult financial training program unveiled by FDIC, CFPB

The FDIC and CFPB have launched a new financial resource tool, Money Smart for Older Adults, to help older adults and their caregivers prevent elder financial exploitation across the country. This free, instructor-led training module is designed to be delivered to older adults and their caregivers by representatives of financial institutions, adult protective service agencies, senior advocacy organizations, law enforcement and others that serve this population.

The module consists of a scripted instructor guide and PowerPoint slides, available on the FDIC website, and a participant/resource guide available on the CFPB website.

Organizations that use Money Smart for Older Adults may be eligible to join the FDIC’s Money Smart Alliance. More information is available on the FDIC website.

Helpful Links

CUNA News Now

Don't Tax My Credit Union Website

CUNA Tax Exemption Advocacy Toolkit (CUNA member log-in/ registration required.)

CUNA Regulatory Advocacy Report (CUNA member log-in/registration required.)

CUNA Legislative Update (CUNA member log-in/registration required.)

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